Adieu California – Intel CEO

Barrett slams the Golden State

Common Topics

Continuing a remarkably frank series of speeches, Intel's leadership now doubts that continued investment by the company in California plant is viable.

"We're investing outside California," said CEO Craig Barrett. Asked if he could justify further expenditure on manufacturing facilities in the Golden State, at an industry symposium, Barrett shook his head and left the stage.

Barrett later qualified the comment, Reuters reports, to suggest that unless there was "dramatic change", and high business taxes were repealed, the investment wasn't worth it.

Such change isn't likely. California has a funding crisis, exacerbated by a cap on property taxes introduced in 1978. The measure, Proposition 13, halved property tax overnight and limited annual property tax hikes to two per cent. When billionaire investor and Schwarzenegger advisor Warren Buffet described it as making "no sense" - he said he pays $14,401 on his $500,000 Omaha house, but only $2,204 on his $4,000,000 California house - the Gropinator's PR minders said that Buffet was speaking only for himself.

With California's population growing by fifty per cent since 1978, someone has to pay. And while Intel, which earned $2,275,000,000 in pre-tax profits in the last quarter, can afford it, the burden has been increasingly born by regressive measures such as tiers of income tax and sales taxes.

Bad education

But there is more to Barrett's case than a plea for corporate welfare. Both Grove and Barrett have cited systemic deficiencies in the US system (concerns shared in Europe too).

A comprehensible version of Andy Grove's 9 October 'TWHRUPBS' speech is now available online here [36 kb PDF] with accompanying slides (here [152 kb PDF]), in which Grove suggested that by 2010 India would employ more software and services staff than the United States. Federal research funding in engineering had fallen 22 per cent and in the physical sciences by 30 per cent, he noted. By contrast, China's managed capitalism was paying dividends. Grove also pointed to the $4 billion lost on intellectual property litigation. He compared the $30,000,000,000 subsidies received by agribusiness to the $1 billion a year he claimed was enough to reverse the lack of competitiveness.

Today, Barrett said that he needed to build plant closest to growing markets: and while the Americas and EMEA are shrinking in market share (down from 32 to 28 per cent and 23 to 21 per cent respectively, year on year), Asia is growing.

Barrett continued Grove's theme that the US was prepared to subsidize what he called "19th century industries" but not education to help technology investment.

""Fifty percent of advanced degrees go to foreign nationals," said Barrett. "We educate these people at taxpayer expense. They should staple a green card to their diplomas and let them stay here," he said. ®